Studies of T cell activation of normal murine T cell clones of the TH1 type have shown that two signals are required to stimulate the cells to make interleukin-2 (IL-2) and divide. One signal is given through the antigen-specific receptor that is uniquely expressed on each clone. The other signal is called costimulation and is delivered through a different receptor. Our major objective during the past year was to characterize the costimulatory signal. Other laboratories had identified the B7/BB1 molecule as the inducible ligand on the APC and CD28 and CTLA-4 on the T cell as potential receptors for costimulation in the production of interleukin-2 (IL-2). We explored the role of these molecules in a new assay for costimulation, the induction of competence to respond to interleukin-4 (IL-4). Murine TH1 clones do not respond directly to IL- 4. They first must be activated by stimulating them with antigens and APC. After 24 hr. the activated T cells then proliferate in response to IL-4. We demonstrated that costimulation is required during the induction phase in order to make the clones competent to proliferate in response to IL-4. Although supplying costimulation also led to the production of IL-2, stimulation with this lymphokine was not the only signal required to gain competence, because addition of IL-2 to a T cell receptor occupancy signal only allowed the cells to become partially competent to respond to IL-4. We concluded from these experiments that the costimulatory signal contributes directly to the attainment of full competence to respond to IL-4. To explore the molecules involved in this costimulation, we used a recombinant fusion protein between CTLA4 and a human Ig immunoglobulin constant region. This molecule reacts with B7/BB1 expressed on activated antigen-presenting cells. We showed that CTLA4Ig could inhibit proliferation and IL-2 production of both TH1 and TH0 murine clones but not IL-4 production by the latter. In addition it inhibited the ability of TH1 clones to gain competence to respond to IL-4. We concluded from these experiments that B7/BB1 is the critical ligand involved in costimulation for both IL-2 production and the gaining of competence to respond to IL-4.